Monday, July 1, 2013

The Dictatorial Route To Egyptian Democracy

The antidote to snake-bite is antevenom made from snake-poison. Similarly, to cure the need for authoritarianism and "strong-man" rule in Egypt, the Egyptian state must first have to be subjected to a harsh dose of iron-fisted rule by a strong leader -- and this heavy-handed rule must be buttressed by full-blown capitalism. Egypt neither has the resources (like Saudi Arabia) to re-distribute to a pliant populace nor can it afford Liberal Democracyon the empty bellies of its 85 million people, half of whom are illiterate and live on $2/day. After all, "you can't eat democracy", goes the old saying.

Here's my crude blue-print for what Egypt has to do to get itself out of its malaise. Firstly, a strong leader should be at the helm; someone who can rule with an iron-fist and who eschews all the niceties and trappings of democracy. Secondly, the strong-leader must appoint a small team of leading economists and technocrats to implement a top-down, root-and-branch overhaul of the Egyptian economy. Egypt has no choice but to go with the full-blown form of Capitalism. Demographic pressures on the ground and a woeful lack of resources means that it must literally go for broke with full-blown Capitalism. There literally is no other way!

The team of economists and technocrats must immediately implement the following economic measures: (a) all capital-controls to be lifted (b) all tariffs on capital-equipment to be removed (c) the Egyptian Pound to be made free-floating (d) all loss-making state-enterprises to be sold (e) all restrictions on the-ease-of-doing-business removed. In this business-friendly environment it should take no less than a week to start a business, and all the paper-work should be available online. (f) the removal of all food and fuel subsidies. I know this will be extremely painful, but these are the subsidies that are bankrupting the state, and the Egyptian state can ill-afford such extravagance. And finally (g) a flat tax of 15% to encourage Egypt's wealthy class to pay their fair share of taxes. Compliance with such a low flat-tax will increase (and not decrease) revenues in a developing economy like Egypt's.

After enacting the above measures the Egyptian economy will start to grow again, albeit from a low base. Egypt should be shooting for growth rates of between 7-10% per year (economic growth of 10% per year will double the economy every seven years). Egypt's poor masses cannot eat the empty rhetoric of democracy, but what they can eat is the sustained prosperity of a growing economy. Once the economy ticks, THEN incremental political and social reforms can be implemented. This is an important point: get the economics right first, and then tackle allother needed reforms. I repeat: this is a crucial point. Often nations like Egypt (stuck in a rut) try to "democratise" their way out of their problems first, before tackling economic problems, with the result being more misery and even anarchy.

A growing economy will feed on itself and a more prosperous citizenry will then demand a greater say in the running of their own affairs. Once the hypothetical "strong-man" hears these words from the streets, he will then know that it's time to allow for a more democratic political-dispensation. And that, my friends, is how Egypt can steer itself to a more prosperous and viable democracy, via the steely hand of a dictatorial-regime and prudent economic policies. If it sounds contradictory, it actually isn't. That's how South Korea and Chile steered themselves from misery to prosperity, and then gradually to viable democracy.